US firms paid an average tax rate of 8% profits in Ireland

Friday 03 May 2013 22.04
US companies paid €1.29 billion to Revenue and repatriated €16.1bn to the US in one year
US companies paid €1.29 billion to Revenue and repatriated €16.1bn to the US in one year

US corporations paid an average tax rate of 8% on their company profits in Ireland, according to a report compiled for American politicians.

The document, released to RTÉ News under Freedom of Information, shows the companies were paying less than the normal corporation tax rate of 12.5%.

Companies can do this by claiming tax credits for different purposes including research and development.

In one year, US companies paid €1.29 billion to the Irish Revenue Commissioners and repatriated €16.1 billion to the US.

The figures were based on an analysis of 304 tax returns by companies examined by the US Congressional Budget Office in a report published in January of this year.

They are based on the most up-to-date figures available which relate to 2008.

The document, called Options for Taxing US Multinational Corporations, outlines a number of alternatives for ensuring the companies pay more tax.

When the companies repatriate money to the US they still have to pay tax, although the US authorities adjust the bill to take account of payments made to the Irish Revenue Commissioners.

However, the companies can also pay low tax in Ireland and defer sending the profits back home.

The report shows despite the fact that Ireland is a relatively small economy among developed nations it was the fourth largest source of repatriated income to the US in 2008.

5% of the total income of US companies who repatriate profits came from Ireland, according to the report.

It says US corporations which paid tax abroad have reduced their income tax liability by about 40%.

The document says the current US tax code "encourages firms to artificially shift reported income abroad and between foreign countries."

"When firms choose to shift either their investments or their reported income abroad, US revenues from corporate income taxes decline,'' it adds.

It says: "The ability to defer foreign income encourages firms to invest and retain earnings in low-tax foreign jurisdictions rather than in the US to avoid paying higher taxes."

The report highlights tax rates in 34 developed countries and finds that Ireland has the lowest corporation tax rate at 12.5%. However, the average rate among the other 34 countries is 19.1%.

While the document does not describe Ireland as a tax haven, it does reference a report by the US Government Accountability Office which did list Ireland as a tax haven.

More recently the Organisation for Economic Co-operation and Development defined a tax haven as a country which charged minimal taxes or none at all, prevented exchange of information with other tax authorities or did not require corporations to establish local business activity in the jurisdiction. On that basis Ireland would not be classed as a tax haven, say accountancy experts.

Among the options for increasing tax paid to US authorities would be to stop the businesses from deferring their liabilities

Other options are treating subsidiaries differently than their operations based in their home country or altering deductions that the companies could make against their income tax.